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Theseus

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Everything posted by Theseus

  1. If internal investment looks good to external investors, external investors to Iraq will come. If people within their own country not willing to invest, why the heck would someone outside their country willing to invest in their country? Location is only relevant to local vendors. Investment is relevant to a stable currency. A stable currency is what the exchange rate is all about. Now do the Hokey Pokey and shake yourself all about!
  2. And once again I have to show someone they are incorrect in which they confuse IMF's Article of Agreements Article 7 with IMF's Balance of Payments Chapter 7. From the IMF BPM7 Chapter 7. Balance Sheet: International Investment Position: Annotated Outline. Als referred to as IMF Chapter 7. Again, IMF Chapter 7 talks about investments. One thing Iraq does not lack is currency nor why should they be out of Article VII of the IMF's Articles of Agreement? If I meant Articles I would have specifically stated "Articles". Also where does the Articles of Agreement VII identify with the design of policy related to investments?
  3. The rate for which bank you go to to cash in. Ever try to exchange foreign currency on a regular basis? You might think I am joking around when I said what I said. Take a look at Western Union, Wise and XE. You will find three different rates being exchanged that are totally different from the market rate or official rate in most currencies. For example take a look at the Filipino Peso. I have seen it go from 54 to 56 in different apps and banks all within the same time frame. So the only rate you should pay attention to is the one that will give you the highest return.
  4. Guru's didn't lie. Iraq was not entirely removed from UN Chapt 7 by the UN Security Council. They still remained under sanctions of UN Chapt 7 until they paid off all of what was owed for the Gulf War - Mostly to Kuwait. Even though the Security Council voted, Iraq still remained under UN Chapt 7 until it met all the criteria. For example, Oil-for-Food was a UN Chapt 7 sanction implementation. The reparations to Kuwait was another sanction implementation of UN Chapt 7. So while the Guru's (or most of them) didn't lie that Iraq was taken out of UN Chapt 7 back in 2013 by vote of the UN Security Council, they were never fully removed from UN Chapt 7 until the final payment to Kuwait. Even then red tape takes forever and a day to get through hence the delay. Don't confuse UN Chapt 7 with IMF Chapt 7. UN CHapt 7 is about trying to resolve conflict peacefully and IMF Chapt 7 is making fiscal rules for investment. Both need to be accomplished by Iraq.
  5. You are talking "postponement" back in 2014. They implemented the White Paper in 2020. The article I speak about is the committee member saying that when they changed the rate to 1460, it was only supposed to be for 1 year. However, the powers that be stated that it would be 5 years. This is not a "postponement of removing the zeros" like what is said in the article you quoted. The WP is being implemented and supposedly suppose to take 5 years to implement and at the end of that 5 years the RV rate would change. It has been pointed out that line at the end of the IMF statement about supporting Iraq, blah, blah, blah. Go back to each year that they conclude their trip to Iraq and write a report. Its always in there. And its actually nothing really to see or pin hopes on because it means nothing other than yeah they know you are working on it but not today. Truly a political statement by the IMF (more like office politics than fight out knuckle drag out political statement.) Its like when unicorns fart rainbows to fly. The farts don't smell because it doesn't exist.
  6. They say that or near that everytime they conclude their visit. It is a standard line and is nothing more than window dressing. Its like when you exit a plane the Airline Stewardesses say "Buh-Bye" to everyone. Its expected and done everytime.
  7. No. There was an SBD in 2016 but Iraq stepped in their own dung by trying to cheat the system and they got caught. That is the reason (moreso than COVID) they did not RV back then. The IMF scolded them but did not "officially" punish them other than to prevent them RVing. Iraq RVing is so much more than putting currency back on the international market at a certain price. It also requires internal and external investment and the stability to maintain investments. And lets set it straight Kuwait did not RV as I have shown this over and over again on here.
  8. Well Dec 2023 came and went. No RV. Again see my previous post remarking the committee member saying no rate change for 5 years in January 2020/1. Five years is 2025 which is what I have been saying for a while now based off of that article and what the White Papers state. Well JohnnyV according to your logic Iraq has RVd more than a dozen times since they were put on the program rate. And it was 1310 not 1300. There is only one RV that people are most concerned with, the RV rate when Iraq comes off of the official program rate. Until then it is just a cat pawing a mouse.
  9. First off back in 2020/1, an Iraqi Committee member said that they would not be changing the rate for 5 years. This was based on the implementation of the White Papers. So far everything that was stated according to the implementation of the White Papers has held. An RV in 2024 is not going to happen according to the Committee member. ( I have posted the statement before. If you want to verify the statement go find it.) When IMF gives Iraq go ahead, then and only then will they RV. Not before.
  10. A lot of people think Kuwait RVd post Gulf war. This is a misnomer and people keep promulgating this lie, Kuwait neither RId or RVd post Gulf War. The data of their currency before the war and after the war shows no evidence of this happening. Because it did not happen.
  11. 16th came and gone. Nothing. Coming up next the release of the 10K notes at the end of this year. 2025 can't come soon enough. GCR moved to 2030.
  12. Since Kuwait never Rvd its like comparing dog crap to prime rib. Tasty if you are dog that eats its own crap.
  13. Please the Kuwaiti Dinar (KWD) never RVd nor RId before or after the war.
  14. Was signing up for Wise today and saw the conversion on Wise. I didn't fully explore it but the conversion from USD to IQD was searchable and results were found. Not a rumor. I do remember that the conversion rate was 1 USD = 1,309 IQD. Expecting something else right now? As Fluffy would say "Bahhh".
  15. How would they get food and water? Who would take care of sanitation needs? Where is the shelter going to come from? Bedding? Laundry? Showers? Potable water? A lot of logistics goes into occupying a parcel of land indefinitely or even temporarily.Not possible for "all" citizens to occupy the green zone as "some" citizens would need to supply the needs of those who are occupying the green zone. BTW ain't no official gonna help provide supplies to those occupying the green zone, unless it benefits them significantly. There will always be those who are on the lookout and will exploit whatever it is that which "significantly benefits" them. People are people, no matter where they are or where they live.
  16. Then let me welcome you to the show, Q followers. That is a war that has been ongoing for a mighty, mighty, long time going back to the time of Lemuria and Atlantis and longer.
  17. The Rise and Fall of Kurdish Power in Iraq. By Bilal Wahab* April 30, 20230 If the 1991 Gulf War led to the birth of the Kurdistan Regional Government, the US invasion in 2003 propelled it into the future. At the start of the invasion, Iraqi Kurdistan served as the northern front of the war, elevating the status of the Kurdistan Regional Government (KRG). The destruction of President Saddam Hussein’s Baathist regime buttressed Kurdish rights and enabled their political and economic power to grow. Compared to the violence and sectarian strife that befell the rest of the country under the US-led occupation, the Kurdistan Region of Iraq was held up by the US pundit class as a “safe haven” and “island of decency”—a narrative the KRG encouraged with a public relations campaign describing Kurdistan as “the Other Iraq.” [1] 2003 brought with it a unity of purpose among Iraq’s Kurdish parties. They capitalized on their longstanding relationship with the United States and Britain, the primary enforcers of the no-fly zone following the first Gulf War and the two major proponents of regime change in 2003. Although differences persisted, Kurdish parties spoke in unison in Baghdad, particularly in the early years following the invasion. They worked to enshrine their new powers and rights into Iraq’s 2005 constitution, which recognized Kurdistan as an official region and granted the KRG power to govern largely independently of Baghdad. Kurdish parties also fully supported the 2005 parliamentary elections. As a result of these efforts, they gained a significant influence within the Iraqi state. Kurdish members of parliament form a significant block that often makes or breaks governments and legislations. In the muhassasa system— the informal but persistent practice of ethno-sectarian division of top jobs—Iraq has only had Kurdish presidents since 2006. Ethnic Kurds have on occasion served as deputy parliament speakers and led key ministries such as finance and foreign affairs. But working within the state apparatus has confused the Kurdish role in Baghdad. On the one hand, the KRG has sought the greatest possible share of the state’s powers and revenues. On the other, given historical Kurdish fears of a strong central government, they have also invested in their ability to secede, exemplified by the referendum for independence in 2017. Today, Iraqi Kurdistan faces external challenges, most notably a legal and financial squeeze by Baghdad’s federal government and threats of Iranian and Turkish attacks. The real threat to the KRG is not external, however. Thirty years after its founding and 20 years on from the US invasion, the KRG—as if going through a mid-life crisis—lacks a clear vision for its future. Amid the threat of losing relevance, it stares at implosion due to economic uncertainties, chronic internal divisions and weak institutions. Finding Wealth Kurds in Iraq have long based their struggle for self-rule on their grievances as a persecuted ethnic minority. Kurdish rulers gained legitimacy by standing up for Kurdish rights. Following the first Gulf War and the 1992 elections, however, such revolutionary credit gave way to democratic legitimacy. The elections gave birth to the KRG and brought two parties, the Patriotic Union of Kurdistan (PUK) and the Kurdistan Democratic Party (KDP), to formal political power. Since then, each of the two major Kurdish parties have remained inextricably associated with a family—the Talabani family lead the PUK, and the Barzani family the KDP (their second and third generations, respectively, are currently at the helm of power). Also Read: “The Elusive Quest for a Kurdish State,” in MER issue 295. The civil war in Iraqi Kurdistan between 1994 and 1998 discredited both parties, dividing the region into two single-party fiefdoms that persist until today. Meanwhile, over the course of the past two decades, as a new generation of each ruling family took on the mantle of leadership, their legitimacy has lacked both revolutionary and democratic standing. Economic development emerged as an alternative. Indeed, between 2004 and 2014, the KRG translated post-invasion opportunities into an economic boom. A construction frenzy in this period caused the capital city of Erbil to more than double in size. The KRG says it has rebuilt 65 percent of rural Kurdistan that was destroyed during the Anfal campaign of ethnic cleansing in 1988. Two of Iraq’s three national cell phone companies are headquartered in Kurdistan, and the region is also home to a slew of hotels, gated communities and private schools, including two American-style universities. By 2005, the KRG had built two international airports, in Sulaymaniyah and Erbil, unshackling the landlocked region. Foreign visitors could obtain visas upon arrival, a policy that the Iraqi government did not adopt until 2021. Mass public hiring decreased unemployment, although foreign laborers filled much of the skills gap. Furthermore, a 2006 investment law, which offered investors perks such as land ownership, tax holidays and profit repatriation, helped the KRG attract significant local and foreign capital. Today, there are over 3,000 foreign companies registered in the region. On the diplomatic front, the KRG hosts 42 consulates and maintains 14 representation offices around the world. Making the most of its geographic location and security, Iraqi Kurdistan has become an important regional trade route and destination. Turkey, whose only land border with Iraq goes through the Kurdistan region, is the KRG’s largest trading partner. In 2017, the volume of trade between Turkey and Iraqi Kurdistan was $2.5 billion, representing nearly one third of Ankara’s overall trade with Iraq.[2] Similarly, one third of Iraq’s imports from Iran—an estimated $2.4 billion a year—are to Iraqi Kurdistan.[3] Moreover, 50 percent of Iran’s exports to Iraq pass through border crossings controlled by the KRG. From Foreign Aid to Oil Federalism The federal system proposed in the 2005 constitution granted the KRG a significant role in managing the oil and gas resources of the region. These provisions served as a safeguard: Should the new Iraq fail, it would be possible for an economically independent Kurdistan to take the next step toward statehood, the penultimate nationalist dream. The constitution envisioned a system of petro-federalism, in which the federal Iraqi government and the KRG would share responsibility over oil policy and revenue. But in the years since its ratification, the Iraqi parliament has consistently failed to pass a national hydrocarbon law that would regulate the energy sector and define these joint roles. Acting proactively, the Kurdish parliament passed its own natural resources law in 2007 and started inking some 55 contracts with international oil companies. While the federal government maintained that this law was unconstitutional and the oil contracts illegal, the KRG pushed ahead. It adopted production-sharing contracts, an industry favorite, which allowed international oil companies a stake in the region’s petroleum assets. This “smaller, faster, lighter” approach, as Deputy Prime Minister Qubad Talabani put it, helped jumpstart the Kurdish energy industry.[4] Small firms, or wildcatters, came first, but Big Oil soon followed. In 2011 and 2012 ExxonMobil and Chevron each signed exploration contracts with the KRG, materially boosting the legal standing of its energy industry. The KRG asked for neither permission nor forgiveness from Baghdad, an approach that in many ways paid off. By mid-2022, the KRG was producing nearly 450,000 barrels of oil per day, most of it exported via the region’s independent pipeline through Turkey. In the second quarter of 2022 alone, Iraqi Kurdistan’s oil sales earned $3.77 billion in gross revenues. While only 41 percent of these revenues made it into KRG coffers (the rest was dedicated to paying the oil sector’s costs as well as servicing its debts) the KRG still reaped $1.57 billion. As for natural gas, the KRG’s marketed natural gas production stood at about 5.3 billion cubic meters per year in 2021.[5] Intent on more independence from Baghdad, the KRG has grown dependent on other entities and factors beyond its control, including global oil prices, the dollar-dinar exchange rate and Turkey, through which its pipeline passes. The payoffs, however, have come with a cost. The federal government’s claim on Kurdish oil has forced the KRG to sell at a political risk discount. Furthermore, disputes between Erbil and Baghdad over oil and customs revenues boiled over in 2014, leading Baghdad to cut off the KRG’s share of the national budget. In 2022, the Iraqi Federal Supreme Court formally ruled that the KRG’s natural resource law was unconstitutional and its oil contracts and exports illegal. The Iraqi government had also sued Turkey in international arbitration courts over allowing the KRG to use the Iraq-Turkey pipeline without Baghdad’s approval. At the time of writing, the court favored Iraq’s position, compelling Turkey to halt the KRG’s oil exports. The future of the KRG’s independent energy industry remains uncertain. Intent on more independence from Baghdad, the KRG has grown dependent on other entities and factors beyond its control, including global oil prices, the dollar-dinar exchange rate and Turkey, through which its pipeline passes. The vulnerabilities of this system started to show in 2014, when the expansion of ISIS caused international oil companies to either withdraw or suspend planned developments. The KRG made up for the losses by taking over Kirkuk’s oil fields following the Iraqi army’s retreat, which doubled the KRG’s crude exports to 550,000 barrels per day. But these gains were hampered by falling oil prices. Per barrel, oil prices fell from a peak of $115 in June 2014 to $70 in December and to $35 by February 2016. Deputy Prime Minister Qubad Talabani described the KRG’s dire financial situation at the time as an “economic tsunami.”[6] A telling manifestation of lost confidence in the KRG has been a renewed wave of migration to Europe. As a result of these factors, among others, by 2021 the KRG faced a debt of $31.6 billion. Internal Divisions and Institutional Weakness In recent years, fissures have cropped up among Iraqi Kurdistan’s ruling families, who have grown in prominence as the region’s political parties have weakened. After PUK founder Jalal Talabani passed away in 2017 his eldest son and nephew together took the reins of the party as co-presidents. In 2021, a feud broke out between the cousins, Bafel and Lahur Talabni, and the former ousted the latter. Meanwhile, on the Barzani side a power struggle is brewing between two Barzani cousins, which has the potential to disrupt not only the cohesion of the KDP but the entire regional government. These internecine struggles reflect broader institutional weaknesses and democratic regression in the Kurdistan region. KRG institutions were brittle and completely unprepared to weather the “economic tsunami” that began in 2014. As an example, KRG institutions were brittle and completely unprepared to weather the “economic tsunami” that began in 2014. The last time the KRG parliament had passed a budget was in 2012. The public sector had swelled uncontrollably, crowding out private sector jobs. By 2017, the KRG was the largest employer in Kurdistan, employing half of the labor force, roughly 1.4 million people, to the tune of $750 million a month.[7] Corruption and inefficiency have marred public sector employment, with thousands of ghost employees, double dippers and undeserved pensioners, while the budding private sector owes its existence to holding companies owned or controlled by members of Kurdistan’s ruling families. To avoid showing its hand to Baghdad, the KRG energy industry has become increasingly opaque and unaccountable. The Peshmerga enjoy influence and prestige and have continued to garner significant public and political support, especially during their partnership with the US-led anti-ISIS coalition, but the cavernous political rift between the PUK and KDP has decreased the Kurdistan region’s value to the United States as a partner and diminished Kurdish leverage in Baghdad. There is no accurate accounting available, but the number of Peshmerga fighters is estimated to range between 160,000 to double that number. Prime Minister Masrour Barzani admitted that the Peshmerga forces have more generals among their ranks than either the US or Chinese military. Ever since the war against ISIS, the United States has provided stipends and training to Peshmerga units in exchange for the promise that the Peshmerga will be unified under the command of the KRG rather than its ruling parties. But the KDP and PUK refuse to surrender control of their respective units—a stance that Iraq’s Popular Mobilization Forces have cited in their own snubbing of national authority. Overall, the KRG’s reputation for valuing democracy and human rights has eroded in the years since 2003. Due to civil war and internal divisions in the 1990s, the region’s second parliamentary elections were not held until 2005, 13 years after the first election. Subsequent elections have taken place only following significant delays. Electoral victory and power are increasingly out of sync in the region. When the unarmed opposition party, Gorran, came in second in the 2009 elections, ahead of the PUK, the two ruling parties did not allow Gorran to share in power. Although President Masoud Barzani’s term ended in 2015, he only left office in 2017, effectively shutting down the Kurdish parliament for two years in order to extend his tenure. No wonder turnout has been steadily declining at Kurdish elections. The KRG’s Future Despite a persistent narrative of grievances and victimhood, Iraqi Kurds have exercised significant power and agency during the past three decades. KRG leaders continue to seek more power and autonomy, but to what end? Although they rebounded after decades of war, genocide and neglect, post-invasion Kurdish politics has not managed to shake off chronic internal divisions. The region’s most advanced institutions that could potentially support an independent Kurdistan remain its economy and Peshmerga forces. While the KRG has wielded economic policy to shift toward political independence, they have yet to produce a viable economic model. Indeed, despite 30 years of successfully managing a regional economy, the endless quest for economic independence has only ended up shifting dependency from Iraq to Turkey or from foreign aid to oil revenues. The ad hoc economic policy that has slowly emerged, like a Polaroid photo, over the past two decades displays traits of socialism, free markets and kleptocracy. Access to power and wealth, meanwhile, remains anchored to politics not to economic activity. The 2017 independence referendum, called for by then-President Barzani, tested the Kurdistan region’s military and economic assets. Neither the international community nor the KRG’s neighbors could stomach redrawing the borders of the Middle East, and the KRG was not ready to withstand the economic and political costs of its push to secede from Iraq. The referendum and its aftermath cost the KRG the gains it had made following the ISIS invasion of 2014, including Kirkuk and its oilfields, which were reclaimed by Iraqi military and Popular Mobilization Forces after an armed encounter with the Peshmerga. Most damaging, however, was the clarity it bestowed on a hitherto ambiguous question: Can the KRG become an independent state? As Kurdish divisions deepen and security in the rest of Iraq improves, the balance of power that once favored the KRG is shifting in Baghdad’s favor. Since the referendum, KRG leaders disagree on visions for their position within Iraq and on plans to save their embattled energy sector. Should the Kurdish economy remain hinged on foreign aid, oil and budget transfers from Baghdad, or can it build a robust economy through reform and diversification? These are among the questions raised over the past 20 years. Whether and how they are answered will determine the Kurdistan Region’s future. Endnotes [1] Thomas L. Friedman, “Opinion | The Kurdish Secret,” The New York Times, September 2, 2007. [2] Serkan Demirtaş, “Turkey’s Trade with KRG ‘Business as Usual’ despite Referendum, Says Economy Minister,” Hürriyet Daily News, September 27, 2017. [3] Michael Georgy, “Defiant Kurds Shrug off Risk of Trade War after Independence Vote,” Reuters, October 18, 2017. [4] Author interview, 2012. [5] “Opportunities to Strengthen the Natural Gas Sector in the Iraq Kurdistan Region,” Qamar Energy Report, September 2021, p. 5. [6] Isabel Coles, “Economic ‘tsunami’ undermines war against Islamic State in Iraq-Kurdish deputy PM,” Reuters, January 16, 2016. [7] “Biometric Payroll System Unveils Widespread Fraud in Iraqi Kurdistan,” Ekurd Daily, February 1, 2017. How to cite this article: Bilal Wahab “The Rise and Fall of Kurdish Power in Iraq,” Middle East Report 306 (Spring 2023).
  18. Written earlier this year: The Devaluation of Iraqi Dinar: Political and Economic Implications February 12, 20230 http://iraqieconomists.net/en/wp-content/uploads/sites/3/2023/02/Excange-rate-USD-IQD.jpeg With the rollout of new controls developed by the US Federal Reserve in collaboration with the Central Bank of Iraq to combat currency smuggling, the dollar exchange rate continued to rise in the Iraqi market, pushing up the prices of food and other essential items. The Central Bank of Iraq has asserted that the rise in the dollar-to-dinar exchange rate is a passing side effect of changes in the mechanism of US dollar selling and will disappear as people get used to the new procedures. There are three possible outcomes for how the crisis will play out: First: Measures by the Iraqi government and the outcome of its talks with the US officials could brake the rising dollar-dinar exchange rate. Second: If banks and businesses fail to adjust to the new controls and the Iraqi government cannot persuade the US monetary authorities to use a more accommodative policy, the dollar exchange rate could continue to rise. Third: The dollar-dinar exchange rate could remain volatile, fluctuating up and down for quite some time. The dollar exchange rate in the Iraqi market climbed further in the final days of January 2023. It exceeded 1650 Iraqi dinars per dollar, up about 190 dinars from the official exchange rate of 1460 dinars per dollar. Food and commodity prices increased, forcing the Iraqi government to scramble to restore the national currency’s exchange rate. The most recent of these measures was the removal of the Central Bank of Iraq (CBI) governor and the appointment of a new governor. The crisis was precipitated mainly by the US Federal Reserve’s decision to enforce stringent new controls over the sale and transfer of dollars to Iraqi banks and traders. The Fed and Monetary Circumvention in Iraq Since most of the money from Iraq’s oil exports ends up in a US bank account set up for the Iraqi ministry of finance, the US Federal Reserve has a lot of say over how much, how quickly, and based on what mechanism, dollars flow into Iraq. The ministry sells these dollars to the Central Bank of Iraq (CBI). This entity controls the country’s foreign exchange rates, oversees its foreign financial reserves, and then deposits them in its account with the US Federal Reserve. Due to this arrangement, the US Federal Reserve has greater discretion over the flow of American currency into Iraq. The CBI sets the market exchange rate for the US dollar and ensures its stability through the currency sale window, a mechanism through which the CBI sells dollars to licensed banks, currency exchanges, and businesses to pay for imports. Because of this, businesses that purchase currency are required to provide invoices for the goods they import to be paid in dollars at the official exchange rate. However, since this system’s introduction, numerous dodgy enterprises have reaped their benefits. For instance, political parties, armed groups, and even foreign entities have set up banks or companies to profit directly from the CBI’s dollar auctions, bypassing the traditional banking system. Additionally, these banks fraudulently forged import invoices to acquire US dollars at the government rate, subsequently transferring those funds to off-shore accounts. According to an Iraqi economist, dollar smuggling operations from Iraq extended beyond the Middle East to include nations like Russia, Cuba, and North Korea, besides its immediate neighbors, including Syria, Lebanon, Turkey, and Iran. Reuters’ report showed they obtained about US$ 100 million a month by exploiting the CBI’s sale system. The central bank previously received some of its dollar deposits in the form of banknotes that were regularly shipped from the US to Iraq. However, recent reports indicate some of these were smuggled to Iran and Turkey, as the powerful neighbors were struggling with plummeting their national currencies. A member of the Iraqi parliament claimed that the country’s central bank sold about US$ 37 billion through the currency sale window in 2022. As recorded by the Iraqi Customs Authority, the value of imported goods is only about US$ 14 billion. This indicates a discrepancy of about US$ 23 billion between the volume of currency sold by the central bank and the amount used for imports. With the rollout of some controls designed by the US Federal Reserve in collaboration with the CBI in November 2022, the Iraqi dinar’s exchange rate against the dollar took a downhill slope. In particular, the controls include a new electronic platform that requires Iraqi banks wishing to buy dollars from the central bank to disclose information about their financial transfers and end users. Moreover, it has become obligatory for merchants and business owners to provide documentation about the financial movement of the purchased dollars and the accounts in which they end up. Al-Ansari, Al-Qabidh, BIME, and Asia, four of the biggest banks engaged in currency trading, were also shut out from the currency sale window because the Iraqi authorities established that they had engaged in money laundering activities. Three of these banks are associated with a businessman named Ali Ghulam, who enjoys close ties with top Iraqi politicians and government figures. He was detained in November while traveling from Lebanon to Baghdad. However, he was quickly released after a few hours without providing details about the charges brought against him or the justifications for his release. This incident indicates the enormous power he wields. Political and Economic Implications Discussions between the US Federal Reserve and the CBI to reform the currency sale window and end pervasive fraud and smuggling operations have been ongoing for some time. International pressure has also been on Iraq to modernize, automate, and reform its financial and banking system. However, the new controls have occurred in the context of three factors: First: The new mechanism was implemented at the same time the United States government — specifically the Treasury Department — stepped up sanctions against Iran. It was in response to the breakdown in talks concerning that country’s nuclear program and the brutal crackdown on protesters in Iran. The sanctions also targeted members of the Quds Force and the Lebanese Hezbollah involved in fuel smuggling and tightened regulation of money flow into Iran. Second: Iraqis have recently been preoccupied with a major financial scandal involving the looting of more than US$ 2.5 billion from the Iraqi Tax Authority, which they have dubbed “the theft of the century. ” The scandal made it clear that there is a vast network of shared interests benefit businesspeople, politicians, and public servants. This again brought to light the extent of Iraq’s pervasive corruption and the widespread smuggling and manipulation of state funds, which are shielded by collusion on the parts of the executive, legislative, and judicial authorities. Third: A new government was formed in Iraq a few months ago, with the Coordination Framework, an alliance controlled by pro-Iran parties, as its primary leader. Armed factions and militias have significant influence within this government. As evidenced by the formation of the Al-Muhandis Company, which is affiliated with the Popular Mobilization Commission, these parties and factions can influence the government’s monetary and economic policies. It would be overstating to say that any of these factors had a decisive impact on the decision to increase oversight of Iraq’s dollar sales. However, they all helped speed up or otherwise back up the case for the new controls. Due to these actions, the number of dollars available on the Iraqi market was significantly reduced, which raised the exchange rate. An Iraqi economist revealed that after introducing the new controls, particularly the aforementioned digital platform, around 90 percent of the dollar purchase orders were turned down. Earlier, the central bank was selling US$ 250 million daily; now, it is selling an average of US$ 55 million. Despite the CBI’s emphasis on the technical nature of the problem, the decline of the Iraqi dinar’s value triggered a political and social backlash. The largest social group that drives market activity comprises government employees, wage earners, and recipients of state-sponsored social welfare. Hence, a decline in the dinar’s value means a decline in their purchasing power, which has led to an economic downturn in some sectors. Meanwhile, the currency speculation market and some banks and exchange companies attempted to use their dollar holdings to manipulate the currency’s supply and increase their profits, contributing to the rapid ascent of the dollar’s exchange rate. Protests were held on January 25 to demand a quick solution. Some political parties and armed factions that the new controls have negatively impacted are increasing their pressure on the government and the CBI. They have been calling for Iraq to wean itself off the dollar and end its reliance on the US Federal Reserve to manage the country’s foreign exchange reserves, or at the very least for the United States to be pressured into relaxing the controls for a set time to allow banks to adjust before reinstating them. In addition, some Coordination Framework coalition members demanded the dismissal of the governor of the Central Bank and suggested that he was affiliated with the Sadrist movement, which is not part of the coalition and is interested in seeing Prime Minister Mohammed Shia’ al-Sudani’s government fail. On the other hand, the ruling Coordination Framework is under increasing fire from Sadrist bloggers and affiliated journalists for failing to stop the dollar exchange rate from crossing the 1600 dinars threshold or to return it to the rate that was in place prior to the government of the former prime minister Mustafa Kadhimi increasing the exchange rate in 2020. Under this pressure, Sudani’s government took some measures, some of which were seen as populist, such as the arrest of several currency dealers on charges of speculation. The Central Bank governor, Mustafa Ghaleb, resigned on January 23, 2023, and the government announced that Ali al-Allaq, the previous governor Mustafa Kadhimi fired, would serve as acting governor. It is common knowledge that Allaq is an associate of former prime minister Nuri al-Maliki and the Dawa Party and that he served as governor under Maliki’s administration. The implication is that this change also takes place in the context of fierce competition for key government positions between the members of the Framework coalition, especially between Maliki and Qais Khazali, the leader of Asain Ahl Al-Haq. Maliki appears more receptive to American demands about the Iraqi currency sale window. The Iraqi prime minister sent the head of the Trade Bank of Iraq into retirement and replaced him with Bilal Hamdani. The same day, he decided to open a new foreign currency window through the Trade Bank of Iraq to sell currency to small businesses, subject to CBI funding the bank with an amount of US$ 500 million to issue letters of credit to small businesses. This action appears to be intended to make it easier to sell dollars outside of the new mechanism established by the US Federal Reserve. The new window might also be an effort to buy time and prevent the value of the exchange rate for the Iraqi dinar from falling further until a deal is reached between the CBI and the US Federal Reserve. However, the new window could develop into an alternative vehicle for currency manipulation and smuggling, putting the Trade Bank of Iraq in danger of US sanctions. According to the Iraqi Foreign Minister, Prime Minister Mohammed al-Sudani will travel to the United States, with the issue of the dollar exchange rate and US Federal Reserves’ new regulations expected to be high on the agenda. Scenarios There are three possible outcomes for how the crisis might play out in Iraq: The first scenario assumes that the Iraqi government’s measures and negotiations with the US authorities will stop the dollar’s upward trend against the dinar. It would possibly lead to a compromise mechanism to loosen regulations that will allow the exchange rate to fall and return to its prior levels. However, this possibility depends on the relations between Baghdad and Washington and the Iraqi government’s ability to convince the United States that it is not wholly under Tehran’s sway. In this case, Sudani’s alliance with Maliki would grow stronger at the expense of his ties to Asa’ib Ahl al-Haq and other pro-Iranian Iraqi factions. The second potential scenario is that the dollar exchange rate keeps rising on the assumption that banks and businesses will be unable to adjust to the new regulations, and the Iraqi government cannot convince the US administration to use a more accommodative policy. Such a scenario risks escalating Iraq’s economic crisis, putting more social and political pressure on the government, and igniting fresh street protests. It could also bolster the power of hardliners within the Coordination Framework and fuel calls for even more extreme action to curtail the Federal Reserve’s sway over Iraq’s banking and financial sector. The third scenario assumes that the dollar-dinar exchange rate will remain volatile, fluctuating up and down, for quite some time. This will happen due to market forces, currency speculation, a need for clarity regarding new financial controls, or the US and Iraqi government’s inability to agree. Conclusions The biggest challenge the Sudani government has faced since taking office in October 2022 is the crisis brought on by the plummeting of the Iraqi currency. This predicament threatens the platform upon which the government made its promises of economic reform, enhanced public services, and higher living standards for citizens. Meanwhile, the crisis affords the Iraqi prime minister an opening to push forward with long-awaited reforms to the country’s banking and financial system to modernize and automate the sector and free it from the grip of financial mafias, political factions, and the black market. Moreover, he may find it easier to promote his moderate approach to relations with the US and to withstand pressures from hardliners in the Coordination Framework and the Iranians behind them, especially as more Iraqis recognize that the US still has strong sway over the country’s economy. Prime minister Sudani’s political future could hinge on how this crisis plays out. If the crisis worsens and spins out of control, the parties to the Coordination Framework may abandon their support for him and scapegoat him to save themselves. This is especially true if the crisis causes public discontent and triggers a new wave of protests.
  19. First, everything is going to all right. De-dollarization is going to take some time as this is part of the education process people have talked about. Second, the Iraqis are selling their dollars to get IQD because Iraq made it illegal to conduct transactions inside the country illegal. So people do what people normally do, they get rid of it. The rise and fall of the dollar and IQD is nothing new, especially to traders in the market. What was to be expected was the initial wave of those selling their USDs to get IQD. A period of sideways movement followed by either an upswing or downswing then a period of stabilization as the market corrects itself. Then a second wave and repeat, followed by a third wave of this before a sense of normalcy finally returns and it will be business as usual. There might be up four or five waves but it will finally stabilize. Third, this will also happen when Iraq RVs as the on rush of investors go to sell back their IQD. Watch this carefully as it is a sign of things to come when the RV happens. Lastly, the lQD will begin to move in the favorable direction. Although I give this process to play out for at least six months as economies are like large vessels and do not turn on a dime. This puts us in November/December, just in time for the rollout of the new 10K notes. Personally, I believe they did this one month early and this was supposed to happen in June. However, the US, I believe, forced Iraq's hand. Once the rollout of the new notes, then we can actually start looking at viable RV windows to happen after the 2024 budget has been put into law next year. Again I stand by the time frame 2025 to 2027 as an RV. They might delete the zeroes before the RV as it would give them time to redominate their currency and exchange the old ones for the new ones and give time for the country to get used to the new denominations. Another, Stage II if you will, part of the education process. All in all things take time in the ME, let it play out but be vigilante.
  20. Ah geez Louise, Iraq is going SWIFT. Guess that quote from that Iranian dude was wrong. Ah shucks, golly gee willikers Batman! Should have had a V8! Or slept in a Holiday Inn Express the night before.
  21. People also tend to forget the USD has denominations of 1, 5, 10, 20, 50 and 100 notes.Iraqis use these denominations daily. The US also uses other denominations solely for trade. SInce the Iraqi currently uses the 20 USD note and not a 25 USD note, because such a note does not exist in the US, by Iraq facilitating a 20K IQD not to be later a 20 IQD note when zeroes are removed, this also bolster's consumer confidence and the mentality of the Iraqi conducting transactions with the final currency upon RV. Ever been to McDOnalds or some other QSR or retail store and had to pay a weird total transaction value, e.g. 37.53, and the cashier take a moment on 1) how to give you back your change and 2) figure out the math from handing them, the cashier, two 20 dollar bills? Now you understand why Iraq is introducing the 20K note and a variety of denominations of coins.
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